‘Should I retire early?’ and other financial questions for older adults during the pandemic

As the COVID-19 pandemic continues, people approaching retirement are weighing their options with new variables in play.

In September, Ilpo Lehto, a 65-year-old maintenance worker at York University, retired a few months ahead of his schedule to avoid becoming exposed to the virus while on public transit and potentially exposing his immunocompromised wife.

Spectator reader Al Dionisi also retired early because of the virus.

I retired in March (and therefore have taken a substantial loss of earnings)," Dionisi wrote in a letter. I just hope that my taxes (and those of other retirees/seniors) don't rise in order to pay off this never-ending debt."

Before making the decision - or any major changes to a financial plan - here are some things to consider:

1. Don't panic

Although there are a lot of uncertainties, it's important to focus on the long-term, said Marvin Ryder, an associate professor focused on marketing, entrepreneurship and business strategy at McMaster University.

If you like what you've invested your money in, if you like what you were doing earlier this year, just keep doing it," he said, noting it's important to think beyond the current circumstances and more for the long-term.

The Spanish flu pandemic of 1918 ... that was followed by a period that we call the Roaring Twenties," said Ryder. I believe we will get past this."

He added that it's important not to take too many risks in the stock market.

The pandemic is like a hurricane," he said. What's a winner at one moment might get blown away the next moment."

Instead of picking short-term winners," he advised to stick to a long-term investment strategy and stick to tried and true" businesses such as banks.

He added that there's a sleeping value of an investment." In other words, whatever you've invested in, you've got to be able to sleep well at night."

2. Have a plan and stick to it

Lisa-Marie Winning, an executive consultant at Winning & Associates, said there is always volatility in the market and a financial plan takes those risks into consideration.

So, her biggest piece of advice is to have a plan and stick to it even when things change.

Winning said she's found retired people are faring quite well" financially, since they're travelling less in the pandemic and, therefore, spending less.

It was people who were approaching retirement who seemed most concerned during the pandemic, she said. Winning advised that they should stay invested and trust their financial plan.

The same goes for retirement, Ryder said.

His own plan was to retire from teaching between the age of 65 and 70, but because McMaster's classes are online this year, he's considering whether to retire early. But he plans to give himself until the end of the school year to make a decision.

I'm going to live with it for a little while and see if I can live with this new environment, then I'll stay around," he said. If I don't, I have options, but I'm not knee-jerking."

He added that in most cases, the decision to retire is likely to impact others - like a significant other or children - so it's important to keep everyone's interests in mind before making a decision.

A financial plan also helps get through emergencies.

Ryder suggests to have savings tucked away that can carry a household for at least three months.

Winning added that alongside financial savings for emergencies, it's important to update wills and power of attorney, and to make one's wishes known to family as part of the plan.

3. Know your options

It's also important to weigh all the options before making any changes that affect finances.

Ryder suggests ask around to see what others are doing, whether that means consulting a financial planner or a bank, or seeking help from a community group.

The more people you can talk to, I think the better it is," said Ryder.

The same goes when considering retirement. Ryder said there could be alternatives instead of an all or a nothing" approach.

Something we've not seen at this point is businesses having early retirement packages," he said. Another alternative could include taking a leave of absence.

I think those are conversations that you've got to have with an employer to see what their flexibility is," he said. I think you're going to have people experiment with semi-retirement as a route going forward."

4. Consider working from home

On the flip side, Benson Honig, the Teresa Cascioli chair in entrepreneurial leadership at McMaster's DeGroote School of Business, suggested that it's best to keep working as long as one can, even if part-time.

The best return is if you can delay taking (the Canada Pension Plan) as long as possible," he said.

Honig added that many older adults often start their own businesses, noting that the number of North Americans aged 50 to 65 who've started their own business has almost doubled in the last 20 years."

A home business also allows people to make money without going outside, for example by selling items on eBay, offering consulting services or tutoring.

Honig - who's part of an initiative called Reframery, which helps women and people of colour start their own businesses - said while a home business might not make a lot of money, it will be worth it if it can help delay taking CPP for some time.

5. Should I worry about taxes going up?

There has been some concern over taxes increasing as a result of government spending during the pandemic.

I think that's a red herring," said Ryder. He noted that Canada never paid off debt from the Second World War, and he believes that's likely to be the same plan for the government instead of raising taxes.

They're going to try to get the economy growing and then generate some additional revenues that way to pay it down," he said.

For him, a bigger concern is that the supports the government introduced at the beginning of the pandemic will not be sustainable.

Going forward, the supports have to be different," he said, adding that the benefits are likely to become more targeted.

Maria Iqbal's reporting is funded by the Canadian government through its Local Journalism Initiative. The funding allows her to report on stories focused on aging issues.